Redlands man pleads guilty in Ponzi case

A Redlands man pleaded guilty Friday morning in Texas federal court to bilking investors out of more than $12 million with help from a former Dallas Cowboy in a Ponzi scheme, federal officials said.

Jeffrey J. Sykes, 54, who owns property on South Lane in Redlands according to property tax assessment data, pleaded guilty to two counts of securities fraud before U.S. District Judge John McBryde in Fort Worth, according to a Justice Department news release.

Sykes and former Cowboy center Michael John Kiselak, 45, were accused of running a Ponzi scheme in connection with Sykes' company, Gemstar Capital Group Inc. Kiselak was not charged in this case.

The two counts of securities fraud stem from false Gemstar account statements that Sykes used to deceive investors about the value of their investments.

The two met in 2006 at a golf tournament, according to the release. The two entered into an agreement where Kiselak, through Kiselak Capital Group LLC, would find investors to take part in a U.S. Treasury bills trading venture.

The men were able to raise more than $46 million from investors for the T-bill trading program, though neither company was actually involved in any such trading program, officials said.

In 2009 Kiselak was accused by the Securities and Exchange Commission of lying to more than a dozen friends and family members who invested with his firm. Kiselak was ordered to surrender $19 million over charges he lied to investors and failed to disclose his 35 percent performance fee, according to an SEC complaint.

Of the more than $46 million gathered from investors, Sykes personally raised nearly $22.5 million by using false information about the non-existent T-bill trading program, authorities said.

Instead, the men used some of the money for personal expenses, authorities said. Overall, after some payments were made during and after the termination of the scheme, investors collectively lost about $12.98 million, according to the release.

Sykes faces a maximum sentence of five years in prison, a $250,000 fine and restitution for each count, authorities said. Sentencing is set for April 26.